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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA
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STATE OF WASHINGTON,
Plaintiff,
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v.
FRANCISCAN HEALTH SYSTEM
d/b/a CHI FRANCISCAN HEALTH;
FRANCISCAN MEDICAL GROUP;
THE DOCTORS CLINIC, A
PROFESSIONAL CORPORATION;
and WESTSOUND ORTHOPAEDICS,
P.S.,
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CASE NO. C17-5690 BHS
ORDER DENYING
DEFENDANTS’ MOTION TO
DISMISS, GRANTING
DEFENDANTS’ MOTION TO
POSTPONE BRIEFING, AND
RENOTING PLAINTIFF’S
MOTION
Defendants.
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This matter comes before the Court on Defendants The Doctors Clinic, A
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Professional Corporation (“TDC”), Franciscan Health System d/b/a CHI Franciscan
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Health (“FHS”), and Franciscan Medical Group’s (“FMG”) (collectively “Defendants”)
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motion to dismiss, Dkt. 39, Plaintiff the State of Washington’s (“State”) motion for
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partial summary judgment, Dkt. 48, and Defendant’s motion to postpone briefing on the
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State’s motion, Dkt. 61. The Court has considered the pleadings filed in support of and
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in opposition to the motions and the remainder of the file and hereby rules as follows:
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ORDER - 1
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I.
PROCEDURAL HISTORY
On August 31, 2017, the State filed a complaint against Defendants FHS, FMG
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(together with FHS, “CHI Franciscan”), TDC, and WestSound Orthopaedics, P.S.,
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asserting a per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, and the
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Washington Consumer Protection Act (“CPA”), RCW Chapter 19.86; an unreasonable
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restraint of trade in violation of 15 U.S.C. § 1 and the CPA; and violation of Section 7 of
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the Clayton Act, as amended, 15 U.S.C. § 18, and the CPA. Dkt. 1 (“Compl.”).
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On October 30, 2017, Defendants moved to dismiss the State’s per se claim and
attached four contracts to their motion. Dkts. 39–39-4. On November 29, 2017, the State
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responded. Dkt. 45. The State also submitted an agreement and multiple documents
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from its investigation into the alleged anti-competitive practices. Dkt. 46. On December
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8, 2017, Defendants replied and moved to strike the State’s evidence. Dkt. 58. 1
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On November 29, 2017, the State moved for partial summary judgment on its first
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claim to establish that CHI Franciscan and TDC are separate entities capable of
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conspiring under 15 U.S.C. § 1 and RCW 19.86.030. Dkt. 49 at 6.
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On December 15, 2017, Defendants moved to postpone briefing on the State’s
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motion for partial summary judgment. Dkt. 61. On December 29, 2017, the State
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responded. Dkt. 67. On January 5, 2018, the State replied. Dkt. 70.
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The Court grants the motion to strike because the evidence is irrelevant to the merits of
Defendants’ motion on whether the State has alleged a plausible claim.
ORDER - 2
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II. FACTUAL BACKGROUND
In early September 2016, Defendants entered into a series of agreements. In
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general, the State alleges that TDC and CHI Franciscan are separate economic entities
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that entered into an agreement to jointly negotiate the prices for the services they provide
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to the public. Taken as true, the State asserts that these agreements establish a horizontal
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price fixing agreement that is per se illegal. Defendants counter that the State
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mischaracterizes their agreement and that it is an “output” agreement that is not subject to
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a per se analysis. The Court need not recite any additional allegations because
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Defendants are dressing a summary judgment motion in Rule 12(b)(6) attire.
III. DISCUSSION
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A.
Standard
Motions to dismiss brought under Rule 12(b)(6) of the Federal Rules of Civil
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Procedure may be based on either the lack of a cognizable legal theory or the absence of
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sufficient facts alleged under such a theory. Balistreri v. Pacifica Police Department,
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901 F.2d 696, 699 (9th Cir. 1990). Material allegations are taken as admitted and the
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complaint is construed in the plaintiff’s favor. Keniston v. Roberts, 717 F.2d 1295, 1301
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(9th Cir. 1983). To survive a motion to dismiss, the complaint does not require detailed
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factual allegations but must provide the grounds for entitlement to relief and not merely a
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“formulaic recitation” of the elements of a cause of action. Bell Atlantic Corp. v.
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Twombly, 127 S. Ct. 1955, 1965 (2007). Plaintiffs must allege “enough facts to state a
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claim to relief that is plausible on its face.” Id. at 1974.
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ORDER - 3
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B.
Per se Agreements
Section 1 of the Sherman Act, 15 U.S.C. § 1, prohibits “[e]very contract,
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combination . . . or conspiracy, in restraint of trade or commerce among the several
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States.” Allied Orthopedic Appliances Inc. v. Tyco Health Care Grp. LP, 592 F.3d 991,
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996 (9th Cir. 2010). In order to state a claim, plaintiff must allege that the defendant (1)
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engaged in a conspiracy (2) that unreasonably restrained trade under either a per se or
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rule of reason analysis (3) in a particular market. American Ad Management, Inc. v. GTE
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Corp., 92 F.3d 781, 784 (9th Cir. 199).
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Under the per se approach, plaintiff must allege that “the practice facially appears
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to be one that would always or almost always tend to restrict competition and decrease
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output.” Id. (quoting NCAA v. Board of Regents of Univ. of Okla., 468 U.S. 85, 100
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(1984)). Over the years, courts have defined a category of agreements that carry a
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“conclusive presumption that the restraint is unreasonable.” Arizona v. Maricopa Cty.
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Med. Soc., 457 U.S. 332, 345 (1982). Relevant to this case, horizontal price fixing
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agreements are considered per se unreasonable restraints on trade. American Ad
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Management, 92 F.3d at 784.
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In this case, Defendants fail to meet their burden to establish that the State’s per se
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claim should be dismissed with prejudice. While the Court appreciates Defendants’
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effort to “focus discovery on the dispositive facts and promote an efficient resolution of
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the case,” Dkt. 39 at 1, the State has sufficiently alleged a horizontal price fixing
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agreement between two distinct economic entities. Accordingly, the State has plausibly
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established a cognizable claim that Defendants’ agreement falls into the defined category
ORDER - 4
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of agreements in which “courts can predict with confidence that [the agreement] would
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be invalidated in all or almost all instances under the rule of reason . . . .” Leegin
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Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 886–87 (2007). The
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majority, if not all, of the authorities the Court has reviewed considered this question
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based on evidence as opposed to allegations, and the trial courts issued either orders on
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summary judgment motions or findings of fact and conclusions of law after a bench trial.
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One notable exception is In re Sulfuric Acid Antitrust Litig., 703 F.3d 1004 (7th Cir.
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2012), in which the district court dismissed the class on the merits when the class refused
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to go to trial under a rule of reason analysis. In that case, Judge Posner provided
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numerous reasons why the parties should know before trial whether to prepare for a per
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se analysis or a rule of reason analysis. Id. at 1010–13. Defendants, however, have
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failed to show that this determination should be made based on the complaint and before
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discovery proceeds. Regardless, Defendants bear the burden of establishing that the
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State’s per se claim is not plausible. They have failed to do so, and the Court denies their
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motion to dismiss.
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C.
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Single Economic Entity
The State moved for summary judgment on the issue of whether Defendants are
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separate economic entities capable of conspiring to fix prices. Dkt. 49. “Section 1, like
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the tango, requires multiplicity: A company cannot conspire with itself.” Freeman v. San
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Diego Ass’n of Realtors, 322 F.3d 1133, 1147 (9th Cir. 2003) (citing Copperweld Corp.
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v. Independence Tube Corp., 467 U.S. 752, 769 (1984)). “If two erstwhile competitors
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combine to become a single economic entity—by merger or acquisition, for example—
ORDER - 5
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the act of combination may violate the antitrust laws, but their subsequent relations are
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generally immune from section 1.” Id. “Whether corporate entities are sufficiently
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independent requires an examination of the particular facts of each case.” Williams v.
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I.B. Fischer Nevada, 999 F.2d 445, 447 (9th Cir. 1993).
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In its motion, the State seeks a legal determination that, despite the agreement
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between Defendants, they are separate economic entities. The State asserts that this
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“issue is ripe for the Court’s decision.” Dkt. 49 at 6. Defendants, however, have moved
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to postpone briefing on the motion for three reasons: (1) their pending motion to dismiss
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could moot the per se claim, (2) the motion anticipates a single entity defense that
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Defendants have not yet asserted, and (3) even if this is an issue, they need time to
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conduct some discovery. Dkt. 61 at 2. Although the first reason is now moot and the
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second reason is an unresolved issue, the Court agrees with Defendants on the third
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reason. The single entity question is fact-based and requires the Court to evaluate four
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guidelines. Freeman, 322 F.3d at 1147. Under these circumstances, Defendants assert a
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compelling argument that they should at least be allowed an opportunity to conduct
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discovery before responding to the State’s motion. Moreover, the State will not be
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prejudiced by a short delay in addressing the legal issue. Therefore, the Court grants
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Defendants’ motion to postpone briefing on the State’s motion. The Clerk shall renote
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the State’s motion for consideration on the Court’s April 20, 2018 calendar, which
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provides Defendants an additional six weeks to conduct discovery and respond.
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ORDER - 6
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IV. ORDER
Therefore, it is hereby ORDERED that Defendants’ motion to dismiss, Dkt. 39, is
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DENIED, Defendants’ motion to postpone briefing on the State’s motion, Dkt. 61, is
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GRANTED, and the Clerk shall renote the State’s motion for partial summary judgment,
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Dkt. 48, for consideration on the Court’s April 20, 2018 calendar.
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Dated this 12th day of March, 2018.
A
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BENJAMIN H. SETTLE
United States District Judge
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ORDER - 7

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